What just happened?

Yesterday the House of Representatives passed a passed a two-year budget and an agreement to once again raise the debt limit. The bill, known as the Bipartisan Budget Act of 2019, is expected to be passed by the Senate next week.

What does the Bipartisan Budget Act of 2019 do?

The legislation amends the Balanced Budget and Emergency Deficit Control Act of 1985 to establish a congressional budget for fiscal years 2020 and 2021. The main actions of the bill are:

• Suspends the debt limit through July 2021

• Increases discretionary spending limits for defense and nondefense spending

• Specifies limits for Overseas Contingency Operations funding (which is exempt from discretionary spending limits)

• Requires the FY2020 discretionary spending limits to be adjusted to modate specified funding for the 2020 Census

What is the debt limit?

In most years the federal government brings in less revenue than it spends. To cover this difference, the Treasury Department has to issue government bonds which increases the national debt. The debt limit (or debt ceiling) is a legislative restriction on the total amount of national debt the Treasury is authorized to borrow to meet its existing legal obligations.

The current debt limit isroughly $22.03 trillion. This new law will suspend this limit to allow Congress to add to the national debt.

What is discretionary spending?

The federal budget contains two types of spending, mandatory and discretionary. Mandatory spending includes funding for programs that Congress has mandated must receive whatever funds are needed to keep the programs running, such as Medicare and Social Security. Discretionary spending includes all spending appropriated by Congress that is not part of mandatory spending.

How much will the discretionary spending be increased?

This bill would increase discretionary spending by $320 billion over the next two years.

What will the budget be for FY2020?

The new law establishes a $1.37 trillion budget agreement, with $738 billion for defense spending and $632 billion in nondefense spending for fiscal year 2020.

How much will this increased spending add to the national debt?

As the Committee for a Responsible Federal Budget notes, by convention, the Congressional Budget Office (CBO) assumes that uncapped discretionary spending grows with inflation. What this means is that since Congress rarely cuts spending, almost all new spending in one year increases spending in all subsequent years.

Increasing the 2021 cap therefore raises the level at which that spending would grow from, building in higher spending in future years as well. As a result, the two years of cap increases will actually raise spending by $1.7 trillion over ten years. (This estimate is the net effect of $1.5 trillion in discretionary spending increases, $250 billion in interest costs.)

Is the deal supported by the Trump administration?

Yes. Although conservatives opposed the legislation, President Trump struck a deal with Speaker of the House Nancy Pelosi, House Minority Leader Kevin McCarthy, Senate Majority Leader Mitch McConnell, and Senate Minority Leader Chuck Schumer to get the spending increases through Congress.